Keurig Green Mountain (GMCR) announced 14% increase in fourth quarter of fiscal 2014 net sales to $1,195.6 million compared to fourth quarter of fiscal 2013 net sales of $1,047.2 million and exceeding the analyst's estimates of $1.16 billion, according to Zacks.
Keurig reported 9% increase in fourth quarter of fiscal 2014 non-GAAP net income of $148.8 million compared to $136.0 million of net income during the same quarter of last year. Non-GAAP diluted income per share increased 1% to $0.90 in fourth quarter of 2014 over $0.89 reported in the same period last year.
Strong financials and strategies
Keurig delivered solid free cash flow of $382 million during the quarter of fiscal year 2014 and returned approximately $1.2 billion of cash to shareholders by offering key dividends and through share repurchases.
Keurig successfully executed on all of its 2014 key strategic priorities and delivered robustly across its three main efforts. First, it launched Keurig 2.0 on time with significant partner and retailer support.
Second, Keurig successfully incorporated many new and formerly unlicensed brands into the Keurig brand and has currently signed several earlier unlicensed volumes. And finally, it remains well on track with several other launch plans and its Keurig Cold platform.
The long-term growth opportunity for Keurig Cold both globally and in North America is huge. The size of the cold beverages portfolio is believed to be over four times the size of the hot beverage portfolio driven by significant consumer interest. And, the timing for the launch of Keurig Cold beverages aligns well with the ongoing consumer preference trend for exclusive at-home experiences.
Goldman Sachs analyst Judy Hong refers the Keurig Cold to be a potentially "disruptive innovation" that has potential to accelerate considerable sales and enable profitable growth for Keurig in the years to come.
Moving ahead into 2015, Keurig system is forecasted to further make hot and cold beverages premium throughout North America, and across the world in a longer-term.
Keurig witnessed excellent growth in its company-owned brands; in entrenched partner brands, like Caribou, Lavazza, Eight O'Clock, Folgers and Starbucks; saw solid growth in non-coffee brands, like Swiss Miss, Bigelow, Tetley, Twinings, Snapple and Lipton; and several other fresh entrants such as Cafe Bustelo, Tea Leaf, Coffee Bean, Honest Tea and Peets all witnessed solid growth acceleration during the year.
According to the Thomson Reuters analyst, David Aurelio, Keurig has also partnered with Dunkin' Donuts (DNKN) and Starbucks (SBUX) which has enabled the former to dominate the single-serve coffee market.
Keurig's strategy to get aligned with some key beverage brands gives customers an added advantage and generates excellent growth for its shareholders, its partners and its customers.
Expansion plans
The introduction of Keurig 2.0 with significant retailer support is believed to be a major product launch in the company's history. Moreover, Keurig accelerated the innovation and launch of a range of three new Keurig 2.0 brewers in just one year. These results suggest the company's accelerated efforts towards robust brand image creation.
Keurig 2.0 system currently forms a key part of the offerings for 100% of its retailers including 100% of partner brands. Further, its Keurig system provides greater variety compared to any other in-home beverage system across the world.
Till March 2015, Keurig plans to offer over 70 brands and approximately 500 of the finest cocoas, teas, coffees and fruit beverages. Keurig's success is primarily based on its unique choice and variety offerings which are expected to continue to define the company's growth story.
Executing well upon the consumers key demands, Keurig introduced its 2.0 platform with numerous cup sizes and a carafe, having enhanced choices never introduced before. The company plans to add extra options in the coming months to please the consumers.
Moreover, Keurig declared new relationships with SUPERVALU, W.B. Mason, Meijer and Kraft during the quarter and started supplying Keurig-manufactured store brands to many new customers that include Sam's Club and Walmart.
KeyBanc's Akshay S. Jagdale reiterated a Buy rating for the Keurig stock and illustrated that the guidance was below the expectations primarily due to conservatism.
Further, Keurig's plan to introduce a home-use, carbonated beverage dispenser to successfully compete with its key rival Sodastream is estimated to be on track for 2015.
Conclusion
So, Keurig is engaged in smart strategies to grow the business, making it a good investment for the long run.
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